The War on Poverty 2.0

Jan. 8 (Bloomberg) -- President Lyndon B. Johnson’s
“unconditional war” on poverty in America would not be short
or easy, he warned, and no single weapon or strategy would
suffice. The intervening five decades have not only proved him
right, they also have shown which approaches are most
successful.

Were it not for Medicaid, unemployment insurance, Head
Start, food stamps and the many other programs LBJ set in motion
50 years ago today, the poverty level would be almost twice as
high as it is -- 16 percent of the population -- with children
and the elderly making up most of the difference. In the recent
downturn alone, the level would have surged by at least five
percentage points.

Still, the U.S. has almost 50 million people living in
poverty, defined as about $12,000 in earnings for an individual
and about $23,500 for a family of four.

While poverty in the U.S. is no longer so dire that
children are dying of malnutrition, as they were in the 1960s,
raising the living standards of the poor remains an economic
imperative -- not only to relieve the 50 million poor of want
but also to help them become more productive workers and net
contributors to society. So the push must continue -- using
strategies that have done the most to raise up the poorest
households over the past five decades.

One of the most effective tools has been the earned income
tax credit, a $55 billion program that rewards the working poor
by refunding some of their income and payroll taxes. The credit
-- which has averaged about $3,000 for families with children --
has helped reduce welfare rolls even more than the 1996 welfare-reform law did. This program, now geared toward single-parent
families, could be expanded to help two-parent families and
parents without child custody.

Congress could also lessen the disincentives to work or wed
by not reducing anti-poverty benefits when a couple marries or
one spouse’s income rises above a cutoff.

Nutrition programs are another effective poverty fighter.
In 2012, the Supplemental Nutrition Assistance Program (aka food
stamps) kept 5 million people out of poverty. School lunches did
the same for 1.2 million children.

In November, when Congress allowed $11 billion in stimulus
funds that beefed up the food-stamp program to expire, it meant
an average 7 percent decrease in benefits for about 45 million
people. And in the farm bill now under consideration, the House
is proposing almost $40 billion more in food-stamp reductions
over 10 years. That would kick 3.8 million people off the
program entirely -- the opposite of what a revived war on
poverty requires.

Tax credits and nutrition programs can mitigate existing
poverty, but preventing poverty is just as important. Like LBJ,
who hoped to break the poverty cycle with the Head Start
preschool program, President Barack Obama is calling for
universal preschool.

Experts debate the benefits, but when all the evidence is
considered, it’s clear that universal pre-K enables children,
especially poor and disadvantaged kids, to enter kindergarten
with improved cognitive skills. The $10 billion annual cost of
Obama’s proposal would pay for itself -- one study says every $1
invested returns $11 later on -- if the U.S. is ever to close
the gap in educational achievement between rich and poor.

Most Americans support expanding, rather than contracting,
such social-welfare efforts. Obama paved the way with the
Patient Protection and Affordable Care Act, which should keep
Americans from having to choose between health care and other
daily necessities. Obama is also rightly pushing Republicans to
extend unemployment benefits for the long-term jobless and to
raise the minimum wage.

Conservative Republicans, notably Representative Paul Ryan
of Wisconsin and Senator Marco Rubio of Florida, are responding
with anti-poverty initiatives of their own. Rubio is even
suggesting wage-enhancement credits for low-income workers, a
close cousin of the earned income tax credit.

Fifty years ago, LBJ was motivated in part by politics. He
was hoping to attract the black vote. If politics is driving
both parties to reach for solutions, that doesn’t make the goal
less worthy. It may even result in a smarter war on poverty.